While the Indian government should continue efforts to get to the bottom of the unaccounted money stashed abroad, the Finance Minister Arun Jaitley in his Budget on Saturday should make a bold announcement of levying 40 per cent penalty on all the unaccounted money and bring it into the mainstream, the Assocham said.
“This would be a practical way of bringing a huge sum of money that may be lying unaccounted into the mainstream and will help the government fill its revenue gap…In a way, we may call it an amnesty scheme, which is not new to the Indian system,” Assocham Secretary General D S Rawat said.
According to the Assocham study on black money, once 40 per cent penalty is levied , there should be an assurance of dropping or not launching any prosecution on honest disclosures of the funds that are lying outside the tax net. . By avoiding long drawn out litigation and encouraging voluntary disclosure more money could be brought back.
“It is not always that all those who have funds which are not shown in their tax returns, has been treated so deliberately. Many a time, with the kind of lack of financial literacy, entrepreneurs, individual tax payers, find themselves in a situation where they find it difficult to get into the main stream. Here, the role of Income Tax authorities and tax administration is important…They must treat tax payers and potential tax payers as friends and make a point that it makes better business sense to be complying with the laws,” the chamber said.
The other important suggestion put forward by Assocham to the Finance Minister is that the policy announcements in the Budget should promise clear rules for holding foreign accounts by corporate and individuals to end avoidable controversies on what constitutes illegal and legal money held abroad.
Minimum alternate tax should be applicable only where suspect tax avoidance is found, further added Rawat.
Besides, there must be a clarification on what constitutes Indian assets transfer and who can undertake it. Then tax it only prospectively. Retro taxing should be given up; in any case the SC judgment in the Voda case is clear enough on the law as it was then. Retro taxing has been one of the most roadblocks in investment decisions regarding India as an investment destination.
The other tax related suggestions include a regime of easy asset transfer with low rates for capital gains. It is essential to promote India as an investment destination. For simplification, the Finance Minister should abolish surcharges on I-T and merge them in a new tax structure. Conciliation machinery for pending tax cases to reduce litigation should be strengthened.